P. Lakshman Rao, Rajam V. The ITO, Srikakulam

ITA 271/VIZ/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6677 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHAN
• Keywords: Business income; Source of fund; Additional evidence
• Section: 143(3)

Judgement Text

ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.271/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) SHRI P. LAKSHMANA RAO, RAJAM ITO, WARD - 1, SRIKAKULAM [PAN NO. ALMPP7058G ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI R.S. ARAVINDAKSHAN, DR / DATE OF HEARING : 15.09.2017 / DATE OF PRONOUNCEMENT : 21.09.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2 {CIT(A)}, VI SAKHAPATNAM VIDE ITA NO.103/2013-14/1243/ITO,W-1,SKL/2014-15 DATED 3 0.3.2015 FOR THE ASSESSMENT YEAR 2011-12. ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 2 2. GROUND NOS.1 & 7 ARE GENERAL IN NATURE, WHICH DO NOT REQUIRE SPECIFIC ADJUDICATION. GROUND NO.2 IS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE. HENCE GROUND NO.2 IS DISMISSED AS NO T PRESSED. 3. GROUND NO.3 IS ESTIMATION OF INCOME AT 10% OF TH E PURCHASE PRICE AS AGAINST THE INCOME ADMITTED BY THE ASSESSEE IN H IS BOOKS OF ACCOUNTS. THE ASSESSEE IS CARRYING ON BUSINESS OF INDIAN MADE FOREIGN LIQUOR (IMFL), HAD FILED THE RETURN OF INCOME DECL ARING TOTAL INCOME OF 2,62,404/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE A.O., DID NOT ACCEPT THE INCOME DECLARED BY THE ASS ESSEE AND ESTIMATED THE PROFIT FROM THE BUSINESS AT 20% OF THE STOCK PU T TO SALE AND ACCORDINGLY COMPUTED THE BUSINESS INCOME FROM IMFL AT RS.22,20,928/- ON TURNOVER OF RS.1,11,04,640/-. ON APPEAL, THE CI T(A) HAS SCALED DOWN THE PERCENTAGE OF PROFIT FROM 20% TO 10% AND D IRECTED THE A.O. TO RE-COMPUTE THE INCOME AT 10% OF PURCHASE PRICE. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEA L IS SQUARELY COVERED IN THE CASE OF SRI VYSYARAJU SATYANARAYANA RAJU, SR IKAKULAM DIST. IN ITA NO.2/VIZAG/2016, WHICH IS REPRODUCED AS UNDER: 3. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL W HERE THE TRIBUNAL HAS ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 3 SCALED DOWN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016. 4. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE AUTHORITIES BELOW. 5. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROF IT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPR A) HAS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED TH AT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSI NESS AND DIRECTED THE A.O. TO RE-COMPUTE THE PROFIT OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. TH E A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN S TOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NO T SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOU NTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HONB LE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROF IT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF B USINESS CARRIED ON BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASS ESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRA DE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGE S CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STA TE GOVERNMENT. THE ASSESSEE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELYING UPON THE DE CISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH C OURT HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THEREFORE, WE ARE OF THE VIEW T HAT THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE LIGHT OF THE FACTS OF THE PRESENT C ASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CI RCUMSTANCES HELD THAT ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 4 ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONA BLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF P ROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF P ROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE O RDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE A SSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEG RA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 A ND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREI GN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASS ESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDER ABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE A SSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET O F ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE I NCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BEN CH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYIN G UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESS EE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BEN CH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOT AL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENUE TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. THEREFORE, WE DIRECT THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIO NS. ORDERED ACCORDINGLY. 5. IN VIEW OF THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DIRECT THE A.O. TO RE-COMPUTE THE INCO ME OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 5 6. GROUND NO.4 IS RELATED TO THE ADDITION OF RS.7,7 6,207/- CONFIRMED BY THE LD. CIT(A). DURING THE APPEAL HEARING, THE LD. A.R. SUBMITTED THAT THE ASSESSING OFFICER DID NOT MAKE ANY SUCH AD DITION OF RS.7,96,207/- IN THE ASSESSMENT ORDER AND THERE WAS NO SUCH WAS GROUND RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) . THE LD. A.R. FURTHER SUBMITTED THAT WHILE PASSING THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT), TH E A.O. MADE FOLLOWING OBSERVATIONS IN PARA NO.5 OF THE ASSESSMENT ORDER: 5. DURING THE YEAR THE ASSESSEE FOUND TO HAVE MADE TOTAL INVESTMENT OF RS. 33,31,201/- TOWARDS 1ST INSTALLMENT OF LICEN CE FEE OF RS. 21,65,375/- ; FDR OF RS. 6,40,000/- BG COMMISSION O F RS. 2,29,824/- AND 1ST PURCHASE OF RS. 2,96,002/-. THUS, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCES FOR THE TOTAL INVESTMENT OF RS3 3,31,201/-. THE ASSESSEE'S AR FILED EXPLANATION STATING AS UNDER: 'THE FDRS OF RS. 6,40,000/- WAS MADE OUT OF MY CIR CULATING CAPITAL. I AM AN ASSESSEE SINCE THE YEAR 2004-05, F ILING THE RETURN OF INCOME REGULARLY. ANY HOW I AM HEREWITH ENCLOSING T HE COPY OF MY CASH BOOK, BANK BOOK AND JOURNAL EXTRACT CONFIRMING MY SOURCES OF INVESTMENT OF YOUR KIND PERUSAL. OUT OF THE TOTAL EXPENDITURE CLAIMED, THE FIRST IN STALMENT OF 1/3 RD LICENCE FEE IS ONLY RS. 21,65,375/- LAM AN ASSESSE E SINCE THE YEAR 2004-5, FILING THE RETURN OF INCOME REGULARLY. ANY HOW I AM HEREWITH ENCLOSING THE COPY OF MY CASH BOOK, BANK B OOK AND JOURNAL EXTRACT CONFIRMING MY SOURCES OF INVESTMENT FOR YOUR KIND PERUSAL. ' 5. THE ASSESSEE HAS NOT EXPLAINED THE SOURCES FOR T HE ABOVE INVESTMENT EVEN AFFORDING SUFFICIENT OPPORTUNITY. E XCEPT STATING IN A VAGUE MANNER, HE HAS NOT PROVED THE INVESTMENT WITH ANY DOCUMENTARY EVIDENCES. THE ENTIRE INVESTMENT HAS TO BE TREATED AS UNEXPLAINED. AS SEEN FROM THE AUDIT REPORT FILED FO R THE ASST. YEAR 2011- 12, THERE WAS A CLOSING CAPITAL BALANCE OF RS. 14,8 4,994/- AS ON 31.3.2010 AFTER ALLOWING CREDIT FOR THIS CAPITAL AND ALSO AFT ER GIVING CREDIT FOR THE UNSECURED LOANS OFFERED TO TAX OF RS. 10,50,000/-, (SINCE THE ABOVE OFFER IS BEING CONSIDERED SEPARATELY AS INCOME FROM OTHER SOURCES, THE SAME ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 6 WOULD GET TELESCOPED BENEFIT FROM OUT OF THE TOTAL INVESTMENT CLAIMED TO HAVE BEEN MADE DURING THE MONTH OF JIN6,2010 I.E., BEFORE THE COMMENCEMENT OF THE BUSINESS. IT IS ALSO PRESUMED T HAT THESE UNSECURED LOANS WHICH HAVE BEEN OFFERED WERE ACCEPTED BEFORE THE COMMENCEMENT OF HIS BUSINESS) THUS, THERE REMAINS AN AMOUNT OF R S. 7,96,207/- TO BE EXPLAINED. THE ASSESSEE'S AR CONTENDED THAT SINCE T HE UNSECURED LOANS WHICH WERE ADDED AS UNPROVED WOULD HAVE TO BE ALLOW ED FROM THIS INVESTMENT AS FUNDS AVAILABLE. THEREFORE, THE AMOUN T OF RS. 7,96,207/- IS TREATED AS EXPLAINED AS SEPARATE ADDITION TOWARDS U NSECURED LOANS IS BEING MADE. 7. ACCORDING TO THE LD. A.O. THE SOURCES OF INVESTM ENTS MADE BY THE ASSESSEE WERE TELESCOPED FROM THE UNSECURED LOANS A DDED BACK TO THE INCOME. HENCE, THE AMOUNT OF RS.7,96,207/- IS TREA TED AS EXPLAINED AND NO SEPARATE ADDITION IS REQUIRED TO BE MADE ON ACCO UNT OF INVESTMENTS. HOWEVER, THE LD. CIT(A) MISUNDERSTOOD THE UNEXPLAI NED INVESTMENT OF RS.7,96,207/- AND CONFIRMED THE SAME AS UNEXPLAINED INCOME. THE LD. A.R. EXPLAINED THAT RS.7,96,207/- FORMED PART OF IN VESTMENT FOR WHICH THE SOURCE WAS TELESCOPED FROM THE ADDITION MADE RE LATING TO THE UNSECURED LOANS ,HENCE NO SEPARATE ADDITION IS WARR ANTED. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDER OF THE A.O. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS PLACED ON RECORD. THE A.O. HAS ACCEPTED IN THE ASSESSMENT ORDER THAT RS.7,96,207/- REPRESENTED THE INVESTMENTS MADE BY T HE ASSESSEE SOURCED FROM THE CAPITAL ACCOUNT AND THE TELESCOPIC BENEFIT IS ALLOWED FROM THE ADDITIONS OF UNSECURED LOANS. HENCE, THE A.O. HAS GIVEN THE FINDINGS THAT NO ADDITION IS REQUIRED TO BE MADE ON ACCOUNT OF ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 7 INVESTMENTS. WE AGREE WITH THE A.O. AND HOLD THAT N O SEPARATE ADDITION IS REQUIRED TO BE MADE ON THE ACCOUNT OF INVESTMENT S. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 9. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. FOUN D THAT THE ASSESSEE HAS OFFERED AN AMOUNT OF RS.10,50,000/- BE ING UNSECURED LOAN FOR WANT OF STRICT PROOF AND THE SAID SUM WAS CREDI TED TO THE CAPITAL ACCOUNT. THE LD CITA) CONFIRMED THE ADDITION AND TH E ASSESSEE IS IN APPEAL BEFORE US. DURING THE APPEAL HEARING, THE A SSESSEE ARGUED THAT ONCE THE INCOME IS ESTIMATED NO ADDITION IS WARRANT ED ON ACCOUNT OF ADDITION TO CAPITAL ACCOUNT. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE DID NOT ESTABLISH THAT THE AMOUNT OF RS.10 ,50,000/- WAS GENERATED OUT OF LIQUOR BUSINESS. IT WAS CREDITED TO THE CAPITAL ACCOUNT, AND NO EVIDENCE WAS FURNISHED BY THE ASSESSEE EVIDE NCING INCOME GENERATED OUT OF LIQUOR BUSINESS OR THE SOURCE OF T HE SAME. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . CIT(A) AND THE SAME IS CONFIRMED. 11. GROUND NO.7 IS RELATED TO THE ADDITION OF RS.8, 90,000/- UNSECURED LOANS. THE A.O. MADE THE ADDITION OF RS.8,90,000/- UNSECURED LOANS FOR ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 8 NON-FURNISHING OF CONFIRMATION LETTERS. BEFORE THE CIT(A), THE ASSESSEE FILED THE CONFIRMATIONS AND LD.CIT(A) HAS FORWARDE D THE CONFIRMATION LETTERS TO THE A.O. AND CALLED FOR THE REMAND REPOR T. IN THE REMAND REPORT, THE AO SUBMITTED THAT THE CREDITORS HAVE CO NFIRMED THE LOANS GIVEN TO THE ASSESSEE. FURTHER, THE A.O. OBSERVED THAT ALL THE CREDITORS ARE HAVING NO SOURCES OF INCOME AND DAILY WAGE EARN ERS AND THEY ARE NOT CAPABLE OF ADVANCING AMOUNTS TO THE ASSESSEE. THE A.O. FURTHER EXAMINED THE BRANCH MANAGER, WHEREIN IT WAS FOUND T HAT ALL THE 15 CREDITORS HAVE PURCHASED THE DEMAND DRAFTS OR A BAN KERS CHEQUE FROM ONLY ONE BRANCH OF APGV BANK, AMUDALAVALASA ON 3.2. 2015 AND ON VERIFICATION, IT WAS FOUND THAT THE BANKERS CHEQUE S WERE PURCHASED BY THIRD PARTY. FOR THE SAKE OF CLARITY AND CONVENIEN CE, WE REPRODUCE THE RELEVANT PARAGRAPH OF THE REMAND REPORT AS UNDER: IN RESPECT OF OTHER 15 (FIFTEEN) CREDITORS, FROM T HE DEPOSITIONS, IT CAME TO UNDERSTAND THAT ALL OF THEM ARE PETTY AGRICULTUR ISTS, HAVING SOURCES OF INCOME FROM CULTIVATION AND DAILY LABOUR IN NON SEASON AND THEY ARE NOT CAPABLE TO ADVANCE ANY AMOUNT FROM THEIR DAY TO DAY EARNINGS, WHICH WILL NOT SUFFICE FOR THEIR LIVELIHOOD. IDENTI TY OF THE CREDITORS WAS PROVED AND THEIR AGRICULTURAL LAND HOLDINGS ARE ALS O PRODUCED IN ORDER TO PROVE THEIR CREDITWORTHINESS. BUT, FROM THE STAT EMENTS IT HAS; BEEN UNDERSTOOD THAT EITHER OF THESE PERSONS ARE HAVING CREDITWORTHINESS TO ADVANCE ANY AMOUNTS, BECAUSE OF THEIR MEAGER EARNIN G. FURTHER, ALL THESE 15 (FIFTEEN) PERSONS HAVE STATED THAT THEY HAVE ADVANCE THE LOAN AMOUNTS, TO SHRI P.LAKSHMAN RAO, T HROUGH APGVB, AMADALAVALASA BRANCH, DEMAND DRAFT I BANKER CHEQUES , WHICH WERE PURCHASED BY PAYING CASH, WHEREAS ALL THESE PERSONS ARE RESIDENTS OF VIZIANAGARAM DISTRICT, IF AT ALL ANY LOAN WAS GIVEN , THEY MIGHT HAVE PAID IT AT THEIR RESPECTIVE VILLAGES OR THEY MIGHT HAVE PURCHASED DEMAND DRAFT I BANKER CHEQUES AT NEAREST BANK TO THEIR VIL LAGE OR MANDALAM, BUT IN THIS CASE, TYPICALLY, IT WAS DEPOSED THAT TH EY PURCHASED DEMAND ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 9 DRAFTS / BANKER CHEQUES IN ANDHRA PRADESH GRAMEENA VISAKHA BANK, AMADALAVASA, WHICH IS NEARLY 25 TO 30 KMS DISTANCE. IN ORDER TO VERIFY THE GENUINENESS AND CORRECTNESS OF THE CONTENTIONS BROUGHT ON RECORDS BY ALL THESE 15 (FIFTEEN) CREDIT ORS, ABOUT THE PURCHASE OF DEMAND DRAFT / BANKER CHEQUES, A LETTER U/S.133(6) WAS ISSUED TO THE BRANCH MANAGER, A.P.G,V,BANK, AMADALA VASA, ON 3.2.2015, TO CONFIRM THE PURCHASE OF DDS/BANKER CHE QUES BY THESE 15 PERSONS. IN COMPLIANCE TO THIS LETTER THE BRANCH ,M ANAGER, FURNISHED THE OF THE DDS/ BANKER CHEQUES SOLD BY THEIR BRANCH ON 29.5.2010, 31.5.2010, 1.6.2010 AND 5.6.2010. ON VERIFICATION O F THE INFORMATION FURNISHED BY THE BANKER, IT IS FULLY ESTABLISHED AN D BEYOND DOUBT PROVED THAT NEITHER ANY ONE OF THESE PERSONS NOR SH RI P.LAKSHMANA RAO HAS PURCHASED ANY DD OR BANKER CHEQUE FROM THIS BRANCH ON THE DATES SPECIFIED BY THEM IN THEIR RESPECTIVE PETITIO N AS ADDITIONAL EVIDENCE AND SUBSEQUENT SWORN DEPOSITIONS GIVEN BY THEM BEFORE THE UNDERSIGNED. IN VIEW OF THE FOREGOING FINDINGS, I REQUEST THE LE ARNED C1T(APPEALS) TO CONFIRM THE UNSECURED LOANS AMOUNTING TO RS,8,90 ,000 (RS,17,61,000 - RS,8,71,000) AS BOGUS. 12. THE LD. CIT(A) CONSIDERED THE REMAND REPORT AND THE SUBMISSIONS MADE BY THE ASSESSEE AND CONFIRMED THE ADDITION HOL DING THAT THE CREDITS ARE NOT GENUINE. FOR THE SAKE OF CLARITY AN D CONVENIENCE WE EXTRACT THE RELEVANT PAGE NOS.8 TO 10 OF CIT(A)S O RDER WHICH READS AS UNDER: 5.3.6 I HAVE CONSIDERED THE SUBMISSIONS AND DETAIL S FILED. I HAVE ALSO PERUSED THE ASSESSMENT FOLDER. WITH REFERENCE TO TH E OTHER 15 CREDITORS, THE ASSESSEE HAS FILED CONFIRMATION LETT ERS ALONG WITH DETAILS OF AGRICULTURAL LAND HELD BY THEM. THE AO ALSO EXAM INED THESE PERSONS AND RECORDED SWORN STATEMENTS FROM THEM. IN THEIR DEPOSITIONS THEY HAVE CONFIRMED THE ADVANCE OF IMPU GNED AMOUNTS TO THE ASSESSEE AND STATED TO BE GIVEN OUT OF THEIR AG RICULTURAL INCOME AND SAVINGS. BUT NONE OF THEM COULD PRODUCE ANY EV IDENCE OF THEIR AGRICULTURAL EARNINGS OR SAVINGS. THEY HAVE A LSO STATED THAT THE AMOUNT WAS GIVEN THROUGH DD TAKEN ON VISAKHA GR AMEENA BANK. IT IS ALSO SEEN THAT THE AO HAD MADE THE INQU IRIES IN AP GRAMEENA VIKAS BANK AND HAS OBTAINED COPIES OF THE COUNTERFOILS FOR MAKING APPLICATION TO OBTAIN DD AND NOTED THAT NONE OF THESE CREDITORS HAVE PURCHASED THE CASH DO ON THE DATES R EFERRED IN THE ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 10 SWORN STATEMENTS OR CONFIRMATION LETTERS. THEREFORE THE AO DISBELIEVED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. 5.3.7 AS REGARDS THE CREDITWORTHINESS OF THESE CRED ITORS, THE AO NOTED THAT THEY ARE PETTY AGRICULTURISTS OR AGRICUL TURAL LABOURERS HAVING MEAGER INCOME. I HAVE PERUSED THE SWORN STAT EMENTS AND ALSO SUPPORTING DETAILS FILED BEFORE THE AO. THE AB OVE CREDITORS HAVE DEPOSED THAT THEY HAVE SUBSTANTIAL AGRICULTURA L INCOME AND ALSO INCOME FROM SALE OF VEGETABLES, MILK ETC BUT N O EVIDENCE WAS FILED IN THIS REGARD. THEIR HOUSEHOLD CARDS FIL ED BEFORE THE AO SHOWS THAT THEIR INCOME WAS IN THE RANGE OF RS.10,0 00/-, RS.12,000/- OR RS.15,000/- PER ANNUM. THE SAME IS T ABULATED HEREUNDER: S.NO. NAME LOAN INCOM E INCOME AS AMOUNT CLAIMED PER HOUSEHOLD CARD 1 BONTHU APPAMMA, 49,875 96000+42000 15,000 UDDAVOLU 2 GEDALA ANNAPOORNAMMA, 59,875 1L AKH+ 60000 12,000 UDDAVOLU 3 KADAGALA SATYAM, 99,750 125000+82000 15,000 UDDAVOLU 4 KADAGALA THATA APPALA 99,750 84000+24000 12,000 NAIDU, UDDAVOLU 5 KADAGALA THAVITI NAIDU, 49,875 70000+48000 12,000 UDDAVOLU 6 MARADANA ANANTHA RAO, 99,750 65000+24000 - - UDDAVOLU 7 MARADANA GOWRAMMA, 49,875 72000+ 54000 10,000 UDD AVOLU 8 PEDDIREDDY KURMINAIDU, 49,875 75000+ 48000 15,000 UDDAVOLU 9 POTNURU 49,875 1LAKH+30000 10,000 APPALANARAYANAMMA, UDDAVOLU 10 THADELA VENKATA RAMANA 17,000 96000+30000 18,000 MURTHY, ROTTAVALASA 11 UDDAVOLU JAGAN MOHAN 49, 875 96000+60000 32,000 RAO, UDDAVOLU 12 YELAMALA RAMESH 99,750 120000+60000 28,000 13 YEGIREDDY ANANTHA 49,875 41000+15000 - - RAO,UDDAVOLU 14 YEGIREDDY VENKU NAIDU, 49,875 85000+48000 12,000 UDDAVOLU 15 TERLI ADINARAYANA, UDAVOLU 15,125 96000+ 42000 15,000 ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 11 THUS IT IS VERY APPARENT THEY DID NOT HAVE CREDITWO RTHINESS TO MAKE THE IMPUGNED ADVANCES. 5.3.8 THE PERUSAL OF THE COPIES OF THE APPLICATION FOR DD PURCHASED ALSO SHOW THAT THE DDS WERE NOT PURCHASED BY ANY OF THESE CREDITORS. THE NAMES OF THE APPLICANTS WERE TOTALLY DIFFERENT AND THE ADDRESS GIVEN WAS AT AMADALAVALASA. THE ADDRESSES O F THE CREDITORS AS GIVEN DURING THE SWORN STATEMENT WAS VUDDAVOLU V ILLAGE, VIZIANAGARAM. THESE DISCREPANCIES DEFINITELY RAISE DOUBT ON THE GENUINENESS OF THE TRANSACTIONS. THERE IS NO NEXUS TO THE DDS TAKEN AND THE AMOUNTS SAID TO BE ADVANCED. ALL THE DDS WE RE PURCHASED IN CASH FOR AMOUNTS LESS THAN RS.50,000/-. ALL THESE F ACTS RAISE DOUBT ON THE GENUINENESS OF THE LOAN TRANSACTIONS AND GIV ES AN INDICATION THAT THE IMPUGNED CREDITS ARE BEING OWNED BY THE AL LEGED CREDITORS BY WAY OF AFTERTHOUGHT. THEREFORE, I FIND THAT THE AO IS JUSTIFIED IN DISBELIEVING CREDITWORTHINESS OF THESE CREDITORS AN D THE GENUINENESS OF THE CREDIT TRANSACTIONS. AS A RESULT, THE ADDITI ONS TO THE TUNE OF RS.8,71,000/IS CONFIRMED. 13. FROM THE ORDER OF THE LD. CIT(A), IT IS EVIDENT THAT THE CREDITORS ARE RESIDING IN DIFFERENT PLACES AND THE ADDRESS WA S GIVEN AS VUDDAVOLU VILLAGE, VIZIANAGARAM. THE DDS WERE PURCHASED BY T HE CREDITORS FROM A.P. GOVERNMENT VIKAS BANK, AMUDALAVALASA LOCATED A T DIFFERENT PLACE. THE DDS PURCHASED SHOWS THAT THE THEY WERE NOT PURC HASED BY ANY OF THE CREDITORS AND THE NAMES OF APPLICANTS WERE D IFFERENT AND THE ADDRESS OF THE PURCHASERS WAS GIVEN AS AMUDALAVALAS A. ALL THE DDS WERE PURCHASED IN CASH FOR AMOUNTS LESS THAN RS.50, 000/-. THE ASSESSEE REQUIRED TO ESTABLISH THE IDENTITY, GENUIN ENESS AND CREDITWORTHINESS OF THE CREDITORS. THOUGH ASSESSEE HAS FURNISHED THE NAMES AND ADDRESSES, THE HOUSE HOLD CARD REVEALED T HAT THE CREDITORS ARE HAVING NO MEANS OR MEAGER MEANS AND NO CAPACITY TO ADVANCE THE ITA NO271./VIZAG/2015 SHRI P. LAKSHMANA RAO, RAJAM 12 AMOUNTS TO THE ASSESSEE. THE HOUSE HOLD CARD AND T HE PURCHASE OF DDS BY THIRD PARTY IN ALL CASES AT AMUDALAVALASA ESTABL ISH THAT THE CREDITORS ARE NOT GENUINE AND THE CREDITORS HAD NO MEANS TO G IVE THE LOANS TO THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS CONFIRMED. 14. GROUND NO.8 IS RELATED TO THE ADDITION OF RS.58 ,584/-, WHICH WAS NOT ARGUED BY THE LD. A.R. THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 21 ST SEPT17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 21.09.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI P. LAKSHMANA RAO, MARUTHI NA GAR, NEAR VIDYA JUNIOR COLLEGE, DOLAPET, RAJAM, SRIKAKULAM DIST. 2. / THE RESPONDENT THE ITO, WARD-1, SRIKAKULAM 3. + / THE CIT-2, VISAKHAPATNAM 4. + ( ) / THE CIT (A)-2, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM